Ten years ago, as risk-taking in the financial sector was growing, Washington regulators either weren't looking, didn't know what they were looking at, or weren't sure what to do about it, Washington observers said.

Now, as memories fade, there is a call for revisiting, if not undoing, some measures put in place to prevent another crisis.

"One of the worst things was that agencies were working alone," said Sarah Bloom Raskin, who served as a Federal Reserve Board governor from 2010 to 2014, when she was appointed deputy secretary of the Treasury Department until 2017.

Related Coverage

That sense of a Wall Street version of the Wild West culminated in passage of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. Its 880 pages directed regulators, including newly created agencies like the Consumer Financial Protection Board, to write scores of new rules aimed at both stabilizing markets and preventing the next crisis.

Another creation of Dodd-Frank was the Financial Stability Oversight Council, designed to have regulators compare notes while looking for systemic risk, and then decide which financial institutions were important enough to be subjected to further oversight.

For investors, the many changes brought by Dodd-Frank include centralized clearing of standard over-the-counter interest-rate and credit-default swaps, which spurred the rise of alternatives managers, and more oversight of hedge fund and other private fund advisers, now required to register and file disclosures with the Securities and Exchange Commission. This month, the Commodity Futures Trading Commission proposed easing swaps rules for "de minimis" practitioners, causing Wall Street watchdog groups to worry about a resurgence of some of the crisis' riskiest practices.

Finalizing updates

Five agencies are finalizing updates to the Volcker rule provision of Dodd-Frank, which prohibits federally backed financial institutions from engaging in proprietary trading or having interests in private equity or hedge funds. In June, the three Republican SEC commissioners, including Chairman Jay Clayton, voted to proceed with changes that include tailoring rules to a bank's size, instead of using a one-size-fits-all approach, and clarifying exemptions for banks' proprietary trading activity.

Republican lawmakers, along with banking and business organizations, pushed for streamlining and clarifying the rule.

With some of that rule-making still on regulators' to-do lists, banking and other financial lobbyists are now trying to convince lawmakers it is time to revisit Dodd-Frank.

"We didn't even finish completing the path, and now we are ripping up the bricks," said former Treasury official Michael Barr, now dean of the Gerald Ford School of Public Policy at the
University of Michigan in Ann Arbor. "We are heading into the wilderness," said Mr. Barr, who was special assistant to Treasury Secretary Robert Rubin from 1995 to 1997 and deputy assistant secretary of the Treasury for community development policy from 1997 to 2001.

The effort to revisit Dodd-Frank began in earnest in 2017, with introduction of a proposed Financial CHOICE Act in the House, a measure that would revamp or remove many key provisions of Dodd–Frank, from banking rules to consumer protections. Ken Bertsch, executive director of the Council of Institutional Investors, at the time likened it to "removing seat belts from cars — it's just too risky." CII officials worried that in addition to hurting the integrity of U.S. capital markets, the legislation would weaken critical shareholder rights that help investors hold management and boards of public companies accountable.

"I think our financial system is substantially better today," said Damon Silvers, director of policy and special counsel for the AFL-CIO in Washington, with $653 billion in assets under management.

"The real vulnerability today is political. Every bill and regulatory measure seems to be designed to go back to that world. The financial system continues to be dominated by the largest banks," said Mr. Silvers, whose biggest concern "is the clear sense I have that the direction of public policy efforts are the same things that caused the crisis. They are designed to enable risk taking by leveraged institutions."

SEC Commissioner Robert Jackson Jr., one of two Democrats on the five-member body, worries a lot of the risk 10 years ago "has been moved into the shadows." Private funds are now reporting to the SEC, "but are we sure we understand what's going on? We are not serious about digging into the information we have. The SEC needs to get serious about understanding what is happening in our markets," he said.

Glad not everything was done

Norm Champ, former investment management division director at the SEC, is glad not everything on the Dodd-Frank to-do list got done.

The first official to come from a hedge fund at the time of the crisis, Mr. Champ said he is "not a big believer in the government solving much. I think the government is unlikely to head off a crisis. If it hadn't been Lehman Brothers, it would have been something else. Everything was so overleveraged.

"Maybe the government created a false sense that it may be willing to step in," said Mr. Champ, who also blames an "obsession with housing" that contributed to overleveraging. "Cheap money distorts markets. I wish we had learned that lesson. Government is not going to control markets or manage markets."

While he agreed with Mr. Jackson of the SEC that private fund reporting as it is currently analyzed by SEC officials has limited utility, "I do believe that the commission's knowledge of private funds has increased," and there is better cooperation among examiners, enforcement officials and investment manager experts. "All across the SEC, I think there's a much more unified approach. If you are going to find risk, it's important that everybody work together."

Still, Mr. Champ said, "Dodd-Frank proceeds from the notion that the government is going to stop the next crisis. I don't think there's an instance of a government stopping a crisis."

When members of the Committee on Investment of Employee Benefit Assets, representing 104 U.S. corporate pension sponsors with $2 trillion in retirement assets, talk about the crisis, "they talk about it as if these occurrences shouldn't be shocking," said Executive Director Dennis Simmons. "There's clearly a notion that markets go up and down, sometimes down quickly."

"I think the notion of that never happening again is not realistic. I don't think there is an expectation that the regulators are going to be able to prevent these," Mr. Simmons said. "It's an investor's job in a lot of ways to be prudent."